A person-focused pay program “rewards employees for acquiring job-related, knowledge, skills or competencies rather than for demonstrating successful job performance.” (Martocchio, 2016) These competencies are typically knowledge or skill based. Employees gain rewards based on trainings, growing and developing specific skill set. Person-focused compensation programs provide the basis for such rewards that are tightly coupled with strategic training and development activities.
There are many advantages from personal-focused programs. These advantages include developing an employee. The most important aspect of this program is that employees can develop their skills, both vertical and horizontal or gain a greater depth on knowledge. Person-focused compensation programs offer two competitive advantages “technological innovations and increased global competition.” (Martocchio, 2016) This means that an employee will develop their skills, while making themselves more competitive in the workplace making them a higher candidate versus someone else. “Now more than ever, to sustain competitive advantage, companies must provide their employees with leading-edge skills and encourage employees to apply their skills proficiently. (Martocchio, 2016) ) This type of program allows for job enrichment and job security. Studies have also shown that this type of program “lead to increased employee commitment, enhanced work motivation, and improved employee satisfaction.” (Martocchio, 2016)
Some disadvantages faced with program-focused pay include labor and training costs. “Hourly labor costs often increase because greater skills should translate into higher pay levels for the majority of workers. Because training is an integral component of person-focused pay systems, training costs are generally higher than they are at companies with job-based pay programs.” (Martocchio, 2016) Another disadvantage is that the pay that is offered does not lineup with the employee’s skill set, additionally in order to train employees, companies must pay into these trainings to develop the skills. Not all organizations may have the budgets to.
According to Strategic Compensation: A Human Resource Management Approach, “Person-focused pay plans reward employees for acquiring job-related, knowledge, skills, or competencies rather than for demonstrating successful job performance. Person-focused pay rewards employees for the promise of performance in the future; merit pay and incentive pay reward employees for promise fulfilled (job performance). This approach to compensating employees often refers to three basic types of person-focused pay programs: pay-for-knowledge, skill-based pay, and competency-based pay” (Martocchio, 2016). Person-focused approach treat compensation as a reward for acquiring and implementing job knowledge and skills. This type of approach is beneficial for the technological age due to jobs requiring new skills and technology making some skills obsolete. Person-focused approach is an advantage for employers due to that it gives their employees the leading edge skills to be globally competitive. Person focused approach is also an advantage to employees because it encourages growth, rewards them on their potential to make positive contributions, and offers job enrichment and variety. Often times it is these factors that led the employee to remain with the company and learn their position thoroughly. There are four types of person-focus programs that an employer may choose to use within their organization such as Stair Step Model, Skills Block Model, Job Point Accrual Model, and Cross Departmental Model. A person-focused approach will motivate an employee because it allows the employee to grow and motivates them to learn. Despite the many advantages of a person-focused approach, there can be some disadvantages to both employer and employee. Some of these include the subjectivity of rating employees according to general criteria instead of specific accomplishments which can lead to a misinterpretation of an inaccurate rating. The person focused pay plan allows employees to grow and motivates them to learn.